Logistics integration: driving force for ASEAN economic development

In 2010, the master plan for ASEAN connectivity initiative has reconfirmed the importance of strengthening logistics cooperation in the course of building a successful ASEAN economic community. ASEAN member states are urgently promoting the integration of logistics services.

Logistics – crucial target for ASEAN

Globalization trends and scientific and technological developments have spurred the powerful development of logistics services to support growing global trade. Logistics service development has become an important target in ASEAN member countries’ policies.

Foreseeing this trend, since 2005, at the 37th ASEAN Economic Ministers Meeting, ASEAN decided to choose logistics as a rapidly-integrating sector in ASEAN and assigned ASEAN Senior Economic Officials to build a roadmap to liberalise logistics services in ASEAN. According to Vietnamese Deputy Minister of Industry and Trade, Nguyen Cam Tu, the roadmap will help to accelerate the facilitation and liberalisation of logistics services by 2013 and eventually make ASEAN a logistics hub for the Asia-Pacific region. It is consistent with ASEAN’s common wish of speeding regional connectivity towards the goal of establishing the ASEAN Economic Community by 2015.

To speed up logistics integration, ASEAN needs to take four steps: liberalize trade, eradicate tariff and non-tariff barriers to facilitate the flow of goods, create opportunities for logistics companies, and improve logistics management capability and human resources development.

As a connector of production stages, from input raw material supply and general production cycle management to output and distribution, logistics integration is expected to enhance connectivity within and among ASEAN member countries, contributing to turning ASEAN into a single market and a common production space as set forth in the Master Plan of the ASEAN Economic Community.

Logistics progress

After two years of implementing the rapid logistics integration roadmap, ASEAN has made important progress. ASEAN companies are free to invest in transportation services in the region. Basically, ASEAN will complete the goods liberation roadmap for trade and investment in 2013. Specifically, in the field of air transport, ASEAN signed multilateral agreements on full freight transportation liberalisation, creating the foundation for a unified aviation market by 2015. In the field of shipping, ASEAN adopted the “Roadmap for building an ASEAN unified competitive shipping” and built a friendly transportation environment to encourage maritime transport investments among ASEAN member countries.

ASEAN is quickly implementing strategic plans, developing customs and the ASEAN Single Window mechanism to harmonise trade management rules and customs procedures among member countries. Under the plan, six ASEAN countries will complete building single-window customs in 2010, and Vietnam will complete this in 2012.

ASEAN is also reviewing and standardizing infrastructure planning, improving legal environments and harmonising transport sector standards. Recent successes show ASEAN’s determination in strengthening “soft” connectivity and removing legal and regulatory barriers.

Vietnam is pioneering building the “soft” system for the logistics development sector. According to experts, this is necessary but not sufficient. The logistics industry has contributed 15 to 20 percent of the country’s GDP (around US$12 billion). Currently, Vietnam has more than 800 logistics companies of different scales, mainly small and medium, with limited professionalism and human resources. Small companies often cannot meet customers’ requirements.

According to experts, logistics services are highly profitable for businesses and vital to the economic performance and macroeconomic stability of any country. Therefore, improving service efficiency to promote the active and effective participation of logistics companies is the key to successful economic development. The ASEAN logistics integration strategy needs to be reflected on logistics development strategies of each member country, including Vietnam.

Tags: vietnam logistics, Vietnam logistics industry